Highlights
Rates of contraction are severe but not accelerating in the Chicago purchasers' report, that is except for employment where the pace of job losses is increasing. Chicago's business barometer for February edged 9 tenths higher to a still severely contractionary 34.2, marking the fourth straight month of contraction at roughly this level. New orders were little changed at 30.6 with backlogs showing slightly less contraction compared to January at 29.3. Prices paid was little changed at 37.8 indicating that month-to-month contraction in input prices is holding steady. The pace of contraction in production eased slightly as the index rose 5 points to 34.7.

Despite the improvement in production, employment was down to 25.2 vs. 34.8 in January and 39.2 in December. The reading points to yet further contraction for factory payrolls in next Friday's employment report, which by all early indications looks to be the worst yet of the recession. There was no significant reaction to today's report, the weakness of which unfortunately is no surprise.

Recent History Of This Indicator
The NAPM-Chicago purchasing managers' index fell nearly 2 points in January to 33.3. The production index was especially weak while the employment index showed the largest drop of any index. Looking ahead, the new orders index was not encouraging with a dip to 30.7 from 31.5 in December. The January reading was deep in negative territory - far below the breakeven point of 50.

Definition
The Institute For Supply Management - Chicago compiles a survey and a composite diffusion index of business conditions in the Chicago area. Since October 2011, the survey has been conducted by Market News International. Manufacturing and non-manufacturing firms both are surveyed. Hence, it is not directly comparable to pure manufacturing surveys. Readings above 50 percent indicate an expanding business sector.
Why Investors Care

The NAPM-Chicago Survey registers manufacturing and non-manufacturing activity in the Chicago region. Investors care about this indicator because the Chicago region mirrors the nation in its distribution of manufacturing activity. Consequently, the NAPM-Chicago survey often moves together with the ISM index, but is reported one day in advance.Data Source: Haver Analytics